Thursday, January 29, 2009

With a combined client base of 1,40,68645 & total outstanding of Rs 61,241,156,410 (Upto 31st March 2008) MFIs in India have really entered into a transition phase, wherein they are running their shoulders with the best in industry round the globe. This has been proved in MIX and Forbes study of "Best MFIs" ranking which were based on different parameters ranging from transparency to operational efficiency. This transition however needs a focused study to fully acknowledge the form,outreach and the very impact it has on the microfinance sector and the possibilities that lies ahead. Starting with the form of these institutes which is of interest not only to the promoters or the incubators of such microfinance institutes but also to the funders and the regulators alike. The study provides a deeper insight on as to how the transition for MFIs from a nascent pahse to their existing forms has shaped their agenda and resources. According to a market study NBFCs accounts for 59.7% ,Society 18.8%, Sec. 25 companies 11.6%, Trust 6.8% and others 3.1% of the total microfinance market based on total loan portfolio. (Source: Microfinance Sector Report 2008)

The growth story of MFIs in India not only contradicts the so called BPL sticked image of microfinance but also questions the very viability of the very principle, as to whether it reaches those who needs it the most. The growth of microfinance industry states a story of success in the southern region, which is often referred to as the "Cradle of Microfinance industry in India" while it sings a contrary tune when it comes to the BIMARU states of our country having high BPL population and a poor growth rate. Southern region lies way ahead with 66% of the total MFIs client base and 75% of the total loan portfolio followed by Eastern region with 21% & 15%,Western region 9% & 4% and Northern region with a meagre share of 4% & 6% of the total pie (Source: Microfinance Sector Report 2008)

A detailed state wise study will throw a better light on the true picture of the cracks hidden behind the stupendous growth of MFIs in India and asks questions which needs answers as early as possible. So that those who have been a part of this transition could relish the fruits of their effort and wherein all the tantrums being backed by sound logic and a true feeling of accomplishment round across the country gives this transition a push to transform into a much needed revolution for our country.

Important points-

- 80% of the MFIs clients were women.->75% of the MFIs clients have received less than Rs 10000.-10% of the total no. of MFIs (Which were the largest) accounted for 76% of all clients.

- 82% of the MFIs clients and the total outstanding is accounted by six states only i.e AP, Karnatka,Tamil Nadu, Orissa, Maharashtra & W. Bengal(SA -DHAN study of 223 MFIs).

- Out of 47 MFIs present in more than 1 state6 MFIs- Presence in more than 5 states19 MFIs- Presence in 3-5 states22 MFIs- Presence in 2 states

Wednesday, January 21, 2009

NewswireToday - /newswire/ - Vienna, Austria, 01/07/2009 - Uniglobal Research today announced that this year's Microfinance Forum will take place in Hotel Intercontinental Vienna on 19-20 March. Following the huge success of last year's forum in Budapest the event promises to be the major industry meeting point.

Banks have started to consider a closer link between their micro-finance-oriented products and their "normal" business. There is increasing commitment to microfinance, greater variety in microfinance products and a closer focus on the market.

The upcoming premier World Private Banking conference in Vienna organized by Uniglobal Research will bring together top representatives of the microfinance and banking environment as well as microfinance networks from all around the world. This is the place to learn from and share strategies with other professionals as well as to extend your network.

Last years event allowed for a unique networking opportunity with leading experts from financial institutions across the globe discussing key strategies.

Key issues to be addressed:

• How global trends & imbalances are affecting Microfinance;• Successful business models in low income markets;• Including the world's poor as investors, producers, sellers and buyers;• Common standards for the Microfinance industry?;• Mobile Banking for the Poor;• Retail Microfinance;• Micro (life) insurance.

The forum will include contributions from leading institutions such as:

• Learn about the current activities and future plans of international commercial banks with regard to microfinance;• Capture lessons from relevant project experience;• Gain a unique perspective on how to align social issues with corporate strategy.

About Uniglobal Research

Prague-based Business Intelligence Provider Uniglobal Reseach is at the forefront of linking business with information. All its events are research driven and highly targeted towards senior level professionals, designed to help you make informed decisions and remain at the cutting edge of business information. Uniglobal Resarch events focus on knowledge expansion, networking but most importantly maximizing deal-making opportunities for all our executive clients.

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JAKARTA, July 28 (Reuters) - Lenders to the world's poor should disclose how much they charge their borrowers, a global network of microcredit agencies said on Monday, urging more transparency and greater protection of the poor.The proposal is backed by Nobel Peace Prize winner Muhammad Yunus, who set up Bangladesh's Grameen Bank and is regarded as the founder of the microcredit movement.More and more commercial banks have gone into microcredit in pursuit of new customers and higher returns. In some countries, such institutions are poorly regulated and free to charge above-market annual interest rates -- of as much as 90 percent, in some extreme cases.Microcredit Summit Campaign urged lenders to disclose their charges to a new, U.S.-based independent microfinance organisation. The Washington DC-based network of microfinance institutions kicked off its annual meeting on Monday on the Indonesian resort island of Bali."Investors, donors, policymakers, researchers and practitioners will immensely benefit from" having access to the interest rate data, Yunus was quoted as saying in a statement by the network.The new global scheme, called MicroFinance Transparency, was launched following controversy over high lending rates to the poor who often lack information or financial expertise."In the past few years, hundreds of for-profit companies have begun financing and marketing loans to the poor in developing nations," the global network of microfinance firms said.It added that the companies have been "attracted by near-monopoly lending environments and misleading pricing systems compounded by borrowers' frequent lack of understanding of the financial details of credit transactions."The global network said participation in the scheme was voluntary but added that investors, donors and practitioners would be able to benefit from public information on lending rates charged by microcredit lenders around the world.The information, published on the Web site www.mftransparency.org, will disclose repayment schedules for each product that participating microfinance institutions offer and will calculate the prices of those products in annual percentage rate terms. (Writing by Gde Anugrah Arka; editing by Sara Webb; Editing by Jon Boyle)

In the confirmation hearings for her nomination as U.S. Secretary of State, Senator Hillary Rodham Clinton mentioned the virtues of microfinance during her opening remarks. Clinton praised the work of Ann Dunham, Barack Obama's late mother, as a pioneer of microfinance in Indonesia.Clinton said, "In my own work on microfinance around the world - from Bangladesh to Chile to Vietnam to South Africa and many other countries - I've seen first-hand how small loans given to poor women to start small businesses can raise standards of living and transform local economies.""President-elect Obama's mother had planned to attend a microfinance forum at the Beijing women's conference in 1995 that I participated in. Unfortunately, she was very ill and couldn't travel and sadly passed away a few months later. But I think it's fair to say that her work in international development, the care and concern she showed for women and for poor people around the world, mattered greatly to her son, and certainly has informed his views and his vision. We will be honored to carry on Ann Dunham's work in the months and years ahead."Read full article

Tuesday, January 13, 2009

I could not resist putting this post on the blog. We will forever remember the 66th annual Golden Globes as the ceremony that pushed Indian cinema over the top, albeit indirectly. Majority the movie has been shot in the Slums of Mumbai.

Saturday, January 10, 2009

The following letter has been issued to Satyam management and staff by Ram Mynampati, Interim CEO of Satyam. Satyam is an IT/ITES Company, which is a part of Services sector and employs approximately 53,000 employees. The letter becomes a must read for all the people related top Services Sector in India. I will come up with my analysis on Satyam Computer Services, very soon. Till then enjoy the motivational letter.--------------------------------------------------------------------------------------------------------------------------------------

Dear colleagues

I write this mail to update you on some critical Board and Leadership level changes in our company, effective immediately. A series of extremely unfortunate events led to this, which I am sure you have seen covered in the media over the past few hours.

A SWAT team consisting of senior leaders has been formed. Many of them are Satyam veterans with a minimum of ten years experience in our company and more than twenty years in the industry. I have been requested to play the role of an Interim CEO and this team will support me, as we steer Satyam through this challenging phase. These are the leaders on the ground and have always had the final call on most customer and associate related matters in the company, so far. This team has committed to work together, to make it happen. The SWAT team represents all Customer Facing units, key Horizontal Competency Units and critical Support Units.

Over the past twenty one years, with your passion and commitment we have built significant customer assets, formidable service offerings, excellent delivery processes and scalable support systems. Satyam has been consistently acknowledged for our leadership bandwidth and has a demonstrated reputation for collaborative functioning. Our renowned Full Life Cycle (FLC) model encouraged ‘Distributed and Empowered’ leadership and prepared us for all situations. This is the time when we have to apply it in real life. What we have been trained for, we will now put to work. Let us continue to handle our respective areas with total autonomy, freedom and control. This is as good a time, as any, to remind ourselves that we have been acknowledged as being amongst the top three Best Employers in India by Hewitt and Mercer in independent surveys in 2007 and American Society of Training & Development (ASTD) named us as the best globally, for our Learning practices - the first company outside USA to be ever awarded this honor. Satyam continues to have everything that is fundamentally required for its success - a strong customer base and a committed universe of approx 53,000 associates.

What we are confronted with is the challenge of continuing our business operations, seamlessly. We will need your involvement and ideas to make it happen. This might involve even more effort at every level, in the near term. This is the time to prove to the world that we are united and will succeed in overcoming the challenges.

This quarter will be tumultuous for us. Rumors will abound and it would be fair to assume that competition will try and leverage it to their advantage. As a proactive measure, we have formed fully empowered Cross Functional Teams, headed by seasoned leaders in the respective areas, to address pan-organizational issues like Delivery Excellence, Customer & Associate Retention, Pipeline Management, Cost Controls, Collections etc. You have helped to build Satyam to be what it is today - and we believe that this cannot be allowed to fail, at any cost. I am confident that I can count on your continued support as I commit to our customers that we will ensure deliverables and commitments are serviced.

On behalf of our new leadership team, I apologize to you for the uncertainty and inconvenience that this incident has caused to you and your families. I assure you that we will emerge stronger, because of this. Increased focus on transparency at all levels, integrity and ethical functioning will be ensured. I want you to stand confidently in front of your families and friends and say that we will now be a better company and that we shall soon be a successful case study of how organizations have turned over a new leaf.

We will be conducting “U Speak” (our Meet-the-Leadership sessions) in each city in India starting next week and will have numerous Webinars to address associates in various countries. We will be meeting many of our customers in person over the next two weeks and will meet those of you onsite, at that time. In these sessions, we will explain to you what happened and articulate the actions that are being taken to retain your confidence in our company.

Let us fight this battle together. I am confident that we will emerge stronger, TOGETHER.

Wednesday, January 7, 2009

As financial markets struggle internationally, some microfinance institutions (MFIs) have begun to see downstream effects in the form of rising lending rates. Royston Braganza, chief executive officer of Grameen Capital India observed “the demand for funds is high because microfinanciers have drawn up aggressive growth plans” and “the cost of funds remains a concern due to the 2 percent increase in just the last quarter.” These factors could make fundraising very difficult for microfinance institutions in cases where they have not built up proper reserves according to K. Vinod Kumar, Assistant Vice-President of member services at SKS Microfinance.

Despite these calls for concern, some key microfinance practitioners and advocates are publicly voicing their support for microfinance as a stable alternative investment. Muhammad Yunus of the Grameen Foundation said, “The financial crisis has not hit the microfinance system” and that “in the middle of all these bad news: microfinance still works.” Bill Clinton said last week that investors should “consider the poor of developing nations as viable investment alternatives to today’s turbulent markets.”

If history serves as any lesson, one might look back to the late 1990s when a recession hit Southeast Asia and Latin America. Although the current crisis is substantially larger and affects markets globally, there are some similarities in their effects; declining investor and consumer confidence can create a lack of funding. In Indonesia, the center of the 1990s financial crisis, the currency collapsed and the economy decreased 13 percent in 1998, impoverishing much of the middle class. But the country’s network of People’s Credit Banks -2,200 institutions serving the low end of the microfinance market with loans averaging US$77-held their collective loan portfolio more or less steady throughout the crisis.

David Roodman, a research fellow for The Center for Global Development (CGD), noted that a factor worth considering is that most foreign investment in microcredit still comes from people and institutions motivated by charity and already primed to accept great risk. Yet even if foreign investment decreases and delays a shift some had foreseen toward commercialization in microfinance, it is just one source of funding. Grameen Bank, which used to borrow heavily from foreign sources, was experiencing excess liquidity from client deposits as recently as 2007 and in many African countries the predominant microfinance model is savings-led financial cooperatives that do not even take foreign investment.

Benjamin Kahn and Tor Jansson of The Inter-American Development Bank (IDB), argue “the fate of an MFI, like that of any firm, will hinge on countless factors both internal and external, some predictable and some not. But all else being equal, there is little doubt that MFIs will benefit from close ties with their local communities, from knowing their borrowers well, from having an ownership structure that includes shareholders with a strong interest in their well-being, from conforming to local financial regulations and from making good use of local savings.”

In spite of these arguments that microfinance will remain stable, the likelihood is that MFIs in their early stages (that depend on government donor agencies, foundations, NGOs, or apex institutions for funding) are more likely to be negatively affected. Laura MacInnis of Reuters observed “Charitable giving and foreign aid flows are likely to dry up as the global economy sours.” Steve Radelet, a senior fellow at CGD, said “Washington in particular would be under severe pressure to pare its international aid spending after agreeing a $700 billion financial rescue package.”

The Inter-American Development Bank, founded in 1959, is a multilateral institution with 47provides research and consultations in addition to hosting conferences. A list of donors to the IDB can be found in the organization’s 2007 annual report.

member countries. Although the main focus of the organization is to provide funding to development initiatives, the IDB also

Grameen Capital is a collaboration between Grameen Foundation, IFMR Trust and Citicorp Finance India Limited, created in January of 2008 to increase the outreach of MFIs and number of livelihood finance providers in India by integrating them into the formal financial markets.

CGD is an independent, not-for-profit think tank that works to reduce global poverty and inequality by encouraging policy change in the U.S. and other rich countries through research and engagement with the policy community.

With MFIs in India registering three figure growth and cut throat competition between MFIs, will it require regulated growth in the days to come?

Chennai, India, January 03, 2009 - These are exciting times for microfinance. While competition bodes well for efficiency of the sector as a whole, unregulated and mindless competition could well end up hurting the entire industry and cause irreparable damage to the vulnerable segments of society that it seeks to serve, says P. N. Vasudevan.

With about 180 million poor households in India, poverty alleviation commands a significant portion of our policy-makers’ attention. Financial inclusion is widely accepted as a crucial step in this direction. In the past few years, the RBI has mandated that banks open many more no-frills accounts for the poorer sections. In parallel, the profusion of microfinance has brought a wide range of poorer people (especially women) into the formal financial services fold.

However, the over 100 per cent y-o-y growth rate of microfinance institutions (MFIs) has triggered comparisons with the rapid rise of sub-prime mortgages in the US. In both cases, loans are provided to the less affluent sections of the society with few credible credit appraisal mechanisms. The credit appraisal of individuals with no prior relationship with formal financial services sector is almost impossible.

This was the precise problem creatively addressed by Dr Mohammad Yunus’ Grameen model. By requiring community members to cross-guarantee each other’s loans, the model leveraged the knowledge and peer pressure embedded in the members’ social network in ensuring prompt repayment among members. The credit appraisal is, in effect, out-sourced to the members themselves!

Pioneering this model, Grameen Bank has been serving the poor in Bangladesh for a few decades now without giving rise to any sub-prime crisis. And the global success of microfinance players following the Grameen model is a mark of its robustness.

The usefulness of the model, coupled with the vast untapped demand, has led MFIs to move from an NGO model to a for-profit corporate format and, in parallel, elicited the interest of private equity players. Ironically, the success of the Grameen model could prove its undoing.

A large majority of customers may not have the skill-sets to scale up their businesses substantially to absorb the additional loans available. This may result in consumption-led loans than income-generating loans, with its natural consequences.

While the competition between new and existing MFIs bodes well for efficiency of the microfinance sector as a whole, unregulated and mindless competition could well end up damaging the entire industry. More importantly, it could cause irreparable damage to the vulnerable segments of society this industry seeks to serve.

Competition not always good

The fall of the small-ticket personal loans (STPL) segment in India provides vital clues on how not to run a lending business. Initially, a couple of players provided STPLs successfully over many years.

However, in 2006, with the entry of as many as eight new players into this segment, the supply-demand equation dramatically shifted. The massive growth of STPL portfolios of all lenders was facilitated by their tendency to find a competitor’s customer and provide an additional loan to the individual — instead of finding a new credit-worthy customer.

Credit appraisal was limited to verifying that the individual had repaid his loan from other STPL players promptly. This led to a ballooning of an individual customer’s indebtedness and, with time, a sufficiently large number of customers defaulted to bring the entire STPL industry to its knees.

NPAs increased four-fold to 20-30 per cent. Almost all STPL players found such poisoned portfolios unsustainable and exited the segment. Thus, a segment that had only a couple of years ago proved profitable for a few players sank with the entry of too many new players.

Gearing up for challenge

Over the past year, MFIs and their partner banks have recognised that there is a clear danger of the rapid infusion of finance exposing members to unsustainable levels of debt.

However, with concerted action, MFIs could still deliver on the dream of financial inclusion for the masses, without exposing the most vulnerable in society to hard times.

MFIs in Tamil Nadu and Karnataka have formed associations to formulate a concerted plan to tackle these problems.

Such associations play a vital role in enabling sharing of information among MFIs. We also urgently need coordination amongst the various MFI practitioners so that a focus on too few customers and consequent over-burdening of clients is prevented.

MFIs are in the process of designing a mutually agreeable code of conduct that would include, among other aspects, a commitment to prevent multiple lending.

A comprehensive communication campaign has also been proposed to help members understand the perils of over-borrowing. This campaign would work in tandem with rigorous training to customers and skill-building exercises. Coordination among MFIs is a must to build sustainability into this sector. Many of the institutions have also built portfolios of allied products to induce prompt repayment.

Through these initiatives, MFIs provide their members access to financial as well as non-financial products and services. This carrot-stick approach is expected to keep the repayment rates at acceptable levels.

Most MFIs are, however, constrained from expanding their suite of financial services under the prevailing regulatory framework.

The Raghuram Rajan Committee had proposed the establishment of small finance banks as a crucial step towards financial inclusion. Regulatory intervention to enable MFIs to grow into such banks would strongly empower the microfinance industry.

Huge potential

Microfinance has the potential to positively impact millions of poor Indians. Dr Mohammad Yunus and Grameen Bank richly deserved the Nobel Prize for conceptualising and implementing such a creative framework to deliver credit to the poor.

To scale this model for it to be able to address the large potential in India, MFIs will need to collaborate in building a sustainable and successful industry. They have made an impressive start in this direction.

Regulatory intervention for transforming MFIs into small finance banks and for leveraging m-banking as a tool for expanding financial inclusion would help nurture the microfinance industry.

These are exciting times for the microfinance segment. The next few decades could truly transform the nation through the largest financial inclusion programme in the history of mankind, duly supported by the Government, policymakers, regulators, bankers, investors and MFIs, and with the active involvement of client groups.

By integrating 180 million poor households into the India growth story, the slogans of ‘Garibi Hatao’ and ‘India Shining’ can truly become a reality.

ACCION(R) International, a pioneer and leader in global microfinance, today announced that it plans to expand its investments to support the development and marketing of microinsurance services to the poor. ACCION has taken a $1.2 million equity share in ParaLife a Swiss microinsurance holding company offering financial protection to low-income populations and people with disabilities. ACCION, drawing on its microinsurance experience, institutional relationships and strong market presence in Latin America , will contribute to ParaLife's regional rollout of low-cost insurance products tailored to the needs of those at the base of the pyramid. ParaLife launched its operations in Mexico late in 2007, and ACCION is supporting the company's expansion in Colombia , where its Latin American hub office is based. ACCION has also announced a $3 million investment in Leapfrog Investments, a $100 million microinsurance investment fund headquartered in Mauritius. The fund, with an expected close in the first quarter of 2009, will build and replicate a sustainable model for developing and marketing microinsurance services to the poor, and will conduct early pilots in Africa and Asia. Leapfrog positions itself as the first global investment firm focused exclusively on businesses that meet the insurance and related financial needs of low-income people in developing countries. "The future of financial inclusion lies in moving microfinance beyond credit, offering the working poor the basic suite of financial tools that we take for granted," said ACCION's Monica Brand, principal director of ACCION's Gateway Microfinance Innovation Fund. "We believe that both ParaLife and LeapFrog will prove bellwethers for the industry, developing flexible, responsive insurance products that meet the needs of a broad range of low-income clients."

ACCION's Global Investments group invests directly in emerging market financial institutions, as well as in technology and information services, through a range of guarantee and equity funds. The group provides early-stage capital to social entrepreneurs to support them in developing innovative products and scaling services that promote financial inclusion at the base of the pyramid.

Saturday, January 3, 2009

October 13, 2006 was the happiest day for Bangladesh. It was a great moment for the whole nation. Announcement came on that day that Grameen Bank and I received the Nobel Peace Prize, 2006. It was a sudden explosion of pride and joy for every Bangladeshi. All Bangladeshi's felt as if each of them received the Nobel Peace Prize. We were happy that the world has given recognition through this prize, that poverty is a threat to peace. Grameen Bank, and the concept and methodology of micro-credit that it has elaborated through its 30 years of work, have contributed to enhancing the chances of peace by reducing poverty. Bangladesh is happy that it could contribute to the world a concept and an institution which can help bring peace to the world.

Following is a brief introduction to Grameen Bank.

Owned by the Poor

Grameen Bank Project was born in the village of Jobra, Bangladesh, in 1976. In 1983 it was transformed into a formal bank under a special law passed for its creation. It is owned by the poor borrowers of the bank who are mostly women. It works exclusively for them. Borrowers of Grameen Bank at present own 95 per cent of the total equity of the bank. Remaining 5 per cent is owned by the government.

No Collateral, No Legal Instrument,No Group-Guarantee or Joint Liability

Grameen Bank does not require any collateral against its micro-loans. Since the bank does not wish to take any borrower to the court of law in case of non-repayment, it does not require the borrowers to sign any legal instrument.Although each borrower must belong to a five-member group, the group is not required to give any guarantee for a loan to its member. Repayment responsibility solely rests on the individual borrower, while the group and the centre oversee that everyone behaves in a responsible way and none gets into repayment problem. There is no form of joint liability, i.e. group members are not responsible to pay on behalf of a defaulting member.

97 per cent Women

Total number of borrowers is 7.61 million, 97 per cent of them are women.

Branches

Grameen Bank has 2,535 branches. It works in 83,343 villages. Total staff is 24,325.

100 per cent Loans Financed From Bank’s Deposits Grameen Bank finances 100 per cent of its outstanding loan from its deposits. Over 54 per cent of its deposits come from bank’s own borrowers. Deposits amount to 137 per cent of the outstanding loans. If we combine both deposits and own resources it becomes 151 per cent of loans outstanding.

No Donor Money, No Loans

In 1995, GB decided not to receive any more donor funds. Since then, it has not requested any fresh funds from donors. Last installment of donor fund, which was in the pipeline, was received in 1998. GB does not see any need to take any donor money or even take loans from local or external sources in future. GB's growing amount of deposits will be more than enough to run and expand its credit programme and repay its existing loans.

Earns Profit

Ever since Grameen Bank came into being, it has made profit every year except in 1983, 1991, and 1992. It has published its audited balance-sheet every year, audited by two internationally reputed audit firms of the country. All these reports are available on CD, and some on our web-site : www.grameen.com. 11.0Revenue and Expenditure Total revenue generated by Grameen Bank in 2007 was Tk 10.64 billion (US $ 155.05 million). Total expenditure was Tk 10.53 billion (US $ 153.49 million). Interest payment on deposits of Tk 4.57 billion (US $ 65.67 million) was the largest component of expenditure (43 per cent). Expenditure on salary, allowances, pension benefits amounted to Tk 2.47 billion (US $ 36.03 million), which was the second largest component of the total expenditure (23 per cent). Grameen Bank made a profit of Tk 106.91 million (US $ 1.56 million) in 2007.

20% Dividend for 2007

Grameen bank has declared 20% dividend for the year 2007. It also has created a Dividend Equalization Fund to ensure distribution of dividends at attractive rates in the coming years.

Distribution of dividends generated great enthusiasm among the Bank's shareholders, i.e., the borrowers.

Low Interest Rates

Government of Bangladesh has fixed interest rate for government-run microcredit programmes at 11 per cent at flat rate. It amounts to about 22 per cent at declining basis. Grameen Bank's interest rate is lower than government rate.

There are four interest rates for loans from Grameen Bank : 20% (declining basis) for income generating loans, 8% for housing loans, 5% for student loans, and 0% (interest-free) loans for Struggling Members (beggars). All interests are simple interest, calculated on declining balance method. This means, if a borrower takes an income-generating loan of say, Tk 1,000, and pays back the entire amount within a year in weekly instalments, she'll pay a total amount of Tk 1,100, i.e. Tk 1,000 as principal, plus Tk 100 as interest for the year, equivalent to 10% flat rate.

Begging is the last resort for survival for a poor person, unless he/she turns into crime or other forms of illegal activities. Among the beggars there are disabled, blind, and retarded people, as well as old people with ill health. Grameen Bank has taken up a special programme, called Struggling Members Programme, to reach out to the beggars. About 105,507 beggars have already joined the programme. Total amount disbursed stands at Tk. 122.04 million. Of that amount of Tk. 88.80 million has already been paid off.

Basic features of the programme are:

1)

Existing rules of Grameen Bank do not apply to beggar members; they make up their own rules.

2)

All loans are interest-free. Loans can be for very long term, to make repayment instalments very small. For example, for a loan to buy a quilt or a mosquito-net, or an umbrella, many borrowers are paying Tk 2.00 (3.4 cents US) per week.

3)

Beggar members are covered under life insurance and loan insurance programmes without paying any cost.

4)

Groups and centres are encouraged to become patrons of the beggar members.

5)

Each member receives an identity badge with Grameen Bank logo. She can display this as she goes about her daily life, to let everybody know that she is a Grameen Bank member and this national institution stands behind her.

6)

Members are not required to give up begging, but are encouraged to take up an additional income-generating activity like selling popular consumer items door to door, or at the place of begging.

Objective of the programme is to provide financial services to the beggars to help them find a dignified livelihood, send their children to school and graduate into becoming regular Grameen Bank members. We wish to make sure that no one in the Grameen Bank villages has to beg for survival.

Housing For the Poor

Grameen Bank introduced housing loan in 1984. It became a very attractive programme for the borrowers. This programme was awarded Aga Khan International Award for Architecture in 1989. Maximum amount given for housing loan is Tk 15,000 (US $ 218) to be repaid over a period of 5 years in weekly instalments. Interest rate is 8 per cent. 661,945 houses have been constructed with the housing loans averaging Tk 13,104 (US $ 191). A total amount of Tk 8.67 billion (US $ 206.35 million) has been disbursed for housing loans. During the past 12 months (from November'07 to October’08) 12,171 houses have been built with housing loans amounting to Tk 115.41 million (US $ 1.68 million).

Micro-enterprise Loans

Many borrowers are moving ahead in businesses faster than others for many favourable reasons, such as, proximity to the market, presence of experienced male members in the family, etc. Grameen Bank provides larger loans, called micro-enterprise loans, for these fast moving members. There is no restriction on the loan size. So far 1,579308 members took micro-enterprise loans. A total of Tk 37.19 billion (US $ 565.66 million) has been disbursed under this category of loans. Average loan size is Tk 23,553 (US $ 343.74), maximum loan taken so far is Tk 1.2 million (US $ 17,500). This was used in purchasing a truck which is operated by the husband of the borrower. Power-tiller, irrigation pump, transport vehicle, and river-craft for transportation and fishing are popular items for micro-enterprise loans. 18.0Scholarships Scholarships are given, every year, to the high performing children of Grameen borrowers, with priority on girl children, to encourage them to stay ahead to their classes. Upto to October'08, scholarships amounting to US$ 1,209,446 have been awarded to 69,990 children. During 2008, US$ 700,000 will be awarded to about 26,000 children, at various levels of school and college education.

Education Loans

Students who succeed in reaching the tertiary level of education are given higher education loans, covering tuition, maintenance, and other school expenses. By October’08, 29,365 students received higher education loans, of them 27,756 students are studying at various universities; 330 are studying in medical schools, 544 are studying to become engineers, 735 are studying in other professional institutions.

Grameen Network

Grameen Bank does not own any share of the following companies in the Grameen network. Nor has it given any loan or received any loan from any of these companies. They are all independent companies, registered under Companies Act of Bangladesh, with obligation to pay all taxes and duties, just like any other company in the country.

The following companies in the Grameen network were created by Grameen Bank, as separate legal entities, to spin off some projects within Grameen Bank funded by donors. Donor funds transferred to Grameen Fund were given as a loan from Grameen Bank. These companies have the following loan liability to Grameen Bank :

Grameen Kalyan (well-being) is a spin off company created by Grameen Bank. Grameen Bank created an internal fund called Social Advancement Fund (SAF) by imputing interest on all the grant money it received from various donors. SAF has been converted into a separate company to carry out its mandate to undertake social advance activities among the Grameen borrowers, such as, education, health, technology, etc.

Loans Paid Off At Death

In case of death of a borrower, all outstanding loans are paid off under Loan Insurance Programme. Under this programme, an insurance fund is created by the interest generated in a savings account created by deposits of the borrowers made for loan insurance purpose, at the time of receiving loans. Each time an amount equal to 3 per cent of the loan amount is deposited in this account. This amount is transferred from the Special Savings account. If the current balance in the insurance savings account is equal or more than the 3 per cent of the loan amount, the borrower does not need to add any more money in this account. If it is less than 3 per cent of the loan amount, she has to deposit enough money to make it equal.

Coverage of the loan insurance programme has also been extended to the husbands with additional deposits in the loan insurance deposit account. A borrower can get the outstanding amount of loan paid off by insurance if her husband dies. She can continue to borrow as if she has paid off the loan.

Total deposits in the loan insurance savings account stood at Tk 4,125.40 million (US$ 60.21 million) as on October 31, 2008. Up to that date 109,154 insured borrowers and insured husbands died and a total outstanding loans and interest of Tk 779.81 million (US $ 11.89 million) left behind was paid off by the bank under the programme. The families of the deceased borrowers are not be required to pay off their debt burden any more, because the insured borrowers or their insured husbands do not leave behind any debt burden to take care of.

Life Insurance

Each year families of deceased borrowers of Grameen Bank receive a total of Tk 8 to 10 million (US $ 0.12 million to 0.15 million) in life insurance benefits. Each family receives Tk 1,500. A total of 108,813 borrowers died so far in Grameen Bank. Their families collectively received a total amount of Tk 198.32 million (US$ 4.12 million). Borrowers are not required to pay any premium for this life insurance. Borrowers come under this insurance coverage by being a shareholder of the bank. 24.0Deposits By the end of October, 2008 total deposit in Grameen Bank stood at Tk. 57.83 billion (US$ 844.13 million). Member deposit constituted 54 per cent of the total deposits. Balance of member deposits has increased at a monthly average rate of 1.18 percent during the last 12 months.

Pension Fund for Borrowers

As borrowers grow older they worry about what will happen to them when they cannot work and earn any more. Grameen Bank addressed that issue by introducing the programme of creating a Pension Fund for old age. It immediately became a very popular programme.

Under this programme a borrower is required to save a small amount, such as Tk 50 (US $ 0.73), each month over a period of 10 years. The depositor gets almost twice the amount of money she saved, at the end of the period. The borrowers find it very attractive. By the end of October 2008 the balance under this account comes to a total of Tk 18.91 billion (US $ 276.00 million). Tk 4.34 billion (US $ 63.29 million) was added during the past 12 months (November ’07 - October, 2008). We expect the balance in this account to grow by Tk 2.25 billion (US $ 32.79 million) in 2008 making the balance to reach Tk 19.60 billion (US $ 285.63 million).

Loan Loss Reserve

Grameen Bank has a very rigourous policy on bad debt provisioning. If a loan does not get paid back on time it is converted into a special type of loan called "Flexible Loan", and 50 per cent provisioning is done on the last day of each month. Hundred per cent provisioning is done when flexible loan completes the second year. At its third year, the outstanding amount is completely written off even if the loan repayment still continues.

Balance in the loan loss reserve stood at Tk 4.66 billion (US $ 67.98 million) at the end of 2007 after writing off an amount of Tk 0.74 billion (US $ 10.78 million) during 2007. Out of the total amount written off in the past an amount of Tk 0.74 billion (US $ 10.85 million) has been recovered during 2007.

Retirement Benefits Paid

Grameen Bank has an attractive retirement policy. Any staff can retire after completing ten years or more of service. At the time of retirement he receives a retirement benefit in cash. It is usually paid out within a month after retirement. Since this benefit was introduced 7,239 staff members retired and received a total amount of Tk 4.42 billion (US $ 76.10 million) in cash. This amounts to Tk 0.61 million (US $ 10,513) per retiring staff. During the past 12 months 619 staff went on retirement collecting a retirement benefit of Tk 613.10 million (US $ 8.94 million). Average retirement benefit per staff was Tk 0.99 million (US $ 14,443 ).

Telephone-Ladies

To-date Grameen Bank has provided loans to 348,733 borrowers to buy mobile phones and offer telecommunication services in nearly half of the villages of Bangladesh where this service never existed before. Telephone-ladies run a very profitable business with these phones.

Telephone-ladies play an important role in the telecommunication sector of the country, and also in generating revenue for Grameen Phone, the largest telephone company in the country. Telephone ladies use 2.22 percent of the total air-time of the company, while their number is only 1.64 per cent of the total number of telephone subscribers of the company.

Getting Elected in Local Bodies

Grameen system makes the borrowers familiar with election process. They routinely go through electing group chairmen and secretaries, centre-chiefs and deputy centre-chiefs every year. They elect board members for running Grameen Bank every three years. This experience has prepared them to run for public offices. They are contesting and getting elected in the local governments. In 2003 local government (Union Porishad) election 7,442 Grameen members contested in the reserved seats for women, 3,059 members got elected. They constitute 24 per cent of the total members elected in the seats reserved for women members in the Union Porishad local government. During 1997 local government election 1,753 members got elected to these reserved seats.

Computerised MIS and Accounting System

Accounting and information management of nearly all the branches (2,524 out of 2,535) has computerised. This has freed the branch staff to devote more time to the borrowers rather than spend it in paper-work. Branch staffs are provided with pre-printed repayment figures for each weekly meeting. If every borrower pays according to the repayment schedule, the staff has nothing to write on the document except for putting the signature. Only the deviations are recorded. Paper work that remains to be done at the village level is to enter figures in the borrowers' passbooks.

All zones (40) are connected with the head office, and with each other, through intra-net. This has made data transfer and communications very easy.

Policy For Opening New Branches

New branches are required to fund themselves entirely with the deposits they moblise. No fund from head office or any other office is lent to them. A new branch is expected to break-even within the first year of its operation.

Crossing the Poverty-Line

According to a recent internal survey, 65 per cent of Grameen borrowers' families of Grameen borrowers have crossed the poverty line. The remaining families are moving steadily towards the poverty line from below.

'Stars' for Achievements

Grameen Bank provides colour-coded stars to branches and staff for 100 percent achievement of a specific task. A branch (or a staff) having five-stars indicate the highest level of performance. At the end of June 2008, branches showed the following result.

1,872 branches, out of total 2,517 branches, received stars (green) for maintaining 100 per cent repayment record.

2,049 branches received stars (blue) for earning profit. (Grameen Bank as a whole earns profit because the total profit of the profit-earning branches exceeds the total loss of the loss-incurring branches.)

1,757 branches earned stars (violet) by meeting all their financing out of their earned income and deposits. These branches not only carry out their business with their own funds, but also contribute their surpluses to meet the fund requirement of deficit branches.

346 branches have applied for stars (brown) for ensuring education for 100% of the children of Grameen families. After the completion of the verification processes their stars will be confirmed. 57 branches have applied for stars (red) indicating branches those have succeeded in taking all its borrowers' families (usually 3,000 families per branch) over the poverty line.

The star will be confirmed only after the verification procedure is completed. Each month branches are coming closer to achieving new stars. Grameen staff look forward to transforming all the branches of Grameen Bank into five star branches.